Revenue Will Decline Under New Model, But Nimble Rehab Providers Can Thrive

Though the skilled nursing landscape under the latest proposed payment model remains unseen, rehabilitation and therapy companies are preparing now for the changes to come.

The Centers for Medicare & Medicaid Services’ (CMS) new Patient-Driven Payment Model (PDPM) is expected to incentivize skilled nursing facilities to take on more medically complex patients, and could provide a renewed focus on appropriate therapy services. But the rehab business model is likely to change significantly as a result as CMS moves away from rewarding volume of therapy hours — and companies are already making preparations.

“Everyone’s going to be affected, and I think companies that can be nimble in how they provide services and make decisions are going to do very well,” Tracy Fritts, vice president of quality and outcomes at Consonus Healthcare, told Skilled Nursing News.

New ways of providing rehab

While the rehab and therapy needs of patients — and thus the amount of therapy — aren’t going to change under PDPM, the way the therapy is provided is a very different animal, George Hager, CEO of Genesis Healthcare (NYSE: GEN), said.

“Under the current RUG [Resource Utilization Group] system, the current low-cost methods of group and concurrent therapy are significantly undervalued,” he explained. “Therapy provided in group and concurrent systems allows for the same level of minutes of therapy to be provided under the lower cost.”

The challenge for rehab companies will be implementing a strategy for setting up these lower-cost methods of providing rehab and therapy, Fritts said.

“The better you are at making decisions and then implementing out in the field, the better off you’re going to be,” Fritts said. “Do they [rehab companies] have the support staff that’s able to get out there and work one-on-one with therapists?”

Consonus provides a variety of services in the post-acute care space, including rehab; the Milwaukie, Ore.-based company has about 80 rehab customers and about 700 licensed therapy professionals. The company has been preparing for a new system — PDPM is based in part on feedback from providers on the proposed Resident Classification System, Version I (RCS-I) — for some time, Fritts said. But it’s also, like Genesis, drawn from lessons learned in the rise of managed care, where Consonus has gained experience dealing with a flat daily rate that has no component designated specifically for therapy.

“We’ve determined clinical programs that are most effective for getting the best outcomes in the shortest amount of time,” Fritts said. “And we’ve been collecting data on that since 2014, and then implementing those clinical programs on our sites.”

Bottom-line impact

The new system will give Genesis’s therapy providers more flexibility in prescribing therapy, according to Lou Ann Soika, who serves as senior vice president of customer relations and strategic development for Genesis’s rehab arm, Genesis Rehab Services.  

“Allowing the clinicians to prescribe therapy how they want, how it makes sense for them, is the opportunity here,” she said. “I think our opportunity is to change practice, change the minds of perhaps patients, clinicians, payer and health plans that individual therapy is the best… we do see the better outcomes with a combination of group and concurrent therapy.”

There is some risk in the complexity of the assessment process upfront, more so than the Resident Utilization Group — Version 4 (RUG-IV), Hager noted. There are also fewer assessments after the initial one in PDPM, making the importance of that first assessment all the greater;  the assessment process dictates reimbursement and by extension revenue.

And revenue for rehab and therapy companies is going to be affected regardless.

“Revenue for sure will go down,” Fritts said, adding that as providers receive less for rehab and want to pay less for it, the volume will probably go down — a phenomenon Consonus has seen with managed care.

“As much as people hate it, financial reimbursement does drive practice,” Fritts observed.

Change in the air

Genesis Rehab Services is in the process of reaching out to its clients to start working on new contracts that reflect the changes, Hager said in the company’s most recent earnings call.

“To the extent there are opportunities under this system to provide therapy on a more cost-effective basis, obviously we’ll be talking to our customers about what their efficiency gain might be and how we might share in that… to the extent that we can provide therapy at a lower cost,” he told SNN. “There’s no question that some of that efficiency will be passed through to our customers, and that will result in a revenue impact to the contract therapy industry.”

That, in turn, will affect the number of therapists that are needed to provide the same level of services Genesis currently offers. As a result, it plans to “leverage that capacity differently,” possibly by focusing on Genesis’s Vitality to You program — which serves residents transitioning from the SNF to the community, Hager said.

“We think therapy can provide a very effective connection to that patient back into the community to ensure safe discharge,” he said. “So those are the types of things we’ll be looking at to utilize our therapist capacity in different ways.”

Written by Maggie Flynn

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Maggie Flynn
Business reporter at Aging Media Network
When she's not working, Maggie enjoys running, reading, writing and sports, in no particular order. Favorite things include murder mysteries, Lake Michigan and the Pittsburgh Penguins.

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